A: Directors of a company are not treated as workers for the employer duties, unless:

they have a contract to work for the company, and

they employ at least one other person.

So if Josh doesn't have a contract of employment to work for the company, he won't be treated as a worker, even if he takes on other workers who will be covered by the employer duties. If he does have a contract to work for the company, he still won't be treated as a worker unless he takes on another worker. In this case, both Josh and the other person would be treated as workers.

Postponement

A. Employers have a duty to assess their workforce to identify the types of worker they employ and the duties they'll have to carry out. For a maximum of three months, postponement gives employers the option to defer:

the assessment of their workers or

the auto enrolment date for workers who have been assessed.

This allows employers to smooth the administration of their employer duties and align it with their existing business processes. For example, they can use postponement to:

stagger the assessment of workers at their staging date

align the assessment of workers with their payroll processes

avoid having to assess seasonal workers

avoid having to automatically enrol those with one-off spikes in earnings

avoid calculating pension contributions on part month earnings.

They can use postponement with their whole workforce, groups of workers or individuals.

Different types of employer

A: Partners are normally self-employed, so they're not treated as workers for the employer duties. However, any employees of the LLP (e.g. administration staff) are likely to be covered by the requirements.

Employers do have to consider that salaried partners in the LLP may be classed as ‘workers’. Such employers will need to consider this aspect and seek advice if required.

Salary exchange

A. As far as the auto enrolment rules are concerned, you must use the post exchanged salary to calculate whether or not minimum contributions have been met.

This is best covered by an example:

Pre exchange salary is £50,000. Contributions are 3% employer and 5% employee (including tax relief). The employee wants to use salary exchange to make their £2,500 contribution. Their post exchange salary is therefore £47,500, meaning that the actual employer contribution of £4,000 (£1,500 + £2,500) represents 8.42% of the £47,500 salary, not 8%.

It therefore needs a bit of maths to calculate in advance what level of sacrifice would result in the minimum contribution being met when measured against the post exchange salary. Most providers require the minimum to be based on the pre exchange salary, accepting that this results in the contribution then being more than the minimum required when measured against the post exchange salary.

In the above example, the employer is making the minimum contribution and the employee is using salary exchange to make the employee contribution. It's unlikely that providers and/or the Pensions Regulator will allow the total required contribution to be funded by employee salary exchange. The employee must always have the option to go for a conventional employer/employee contribution basis and there must be no coercion into using salary exchange.

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The Royal London Mutual Insurance Society Limited is authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and the Prudential Regulation Authority. Registered in England and Wales number 99064. Registered office: 55 Gracechurch Street, London EC3V 0RL.

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